Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

The Estonian fiscal position is much better than in many OECD countries, the country stands out for having a rather lean government sector and the authorities are striving for efficient use of existing resources. Both healthcare and local government were particularly hit the by the decrease of resources as a result of the unprecedented GDP fall during the downturn. As a return to high revenue buoyancy will not be immediate, there are challenges for delivering the same with less money but it is also an opportunity to reconsider provision of public services. The healthcare sector is state dominated and offers some scope for efficiency improvements. On the supply side, further streamlining of the existing hospital network, emphasising primary care, and keeping an eye on the standard of quality of care, would be helpful. A number of market signals are already in place on the demand side, such as fees and drug co-payments. Yet these raise issues of accessibility of healthcare, in particular for financially distressed households. A cap on out-of-pocket spending together with active promotion of least expensive drugs use would help to address this issue. Local government seems rather extensive and fragmented for such a small country. Exploiting economies of scale, either by merging or requiring deeper co-operation, should bring gains in terms of public service efficiency. Offering greater scope for tax raising at the local level can incentivise the municipalities to adopt more growth-oriented economic policies. This working Paper relates to the 2010 Economic Survey of Estonia (www.oecd.org/eco/surveys/estonia).

Keywords:

healthcare,
Estonia,
local government,
public sector

JEL Classification:

H41: Public Economics / Publicly Provided Goods / Public Goods

H72: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Budget and Expenditures